IT is one of these corporate support functions, and HMRC made savings to the tune of £111m in 2011-2012 but only £74m counted towards its spending review savings target as the remaining £37m related to reductions in capital expenditure and were thus not applicable.

HMRC outsources its IT support and development to a consortium of suppliers through its 13-year contract with Aspire, signed in 2004.

The NAO said that HMRC had renegotiated the contract to reduce running costs by £161m a year from 2011 to 2012 by reducing service charges, prices paid for laptops and hardware and "managing the IT contract more efficiently".

Before the spending review, it had made £47m of savings, leaving it with a target of £114m in 2011-12, but it has missed that target by £3m.

HMRC's savings come despite spending £22m more in 2011-12 on IT administration. This was because credits from its contractors totalling £48m in 2010-11 either did not recur or were for a lower value. HMRC also received £10m less income than expected from other government departments that use its IT services.

Amyas Morse, head of the NAO said: "HMRC is moving from making tactical efficiency savings and quick wins towards a more strategic approach to managing its resources. We recognise the importance of this change and note that HMRC is addressing PAC and NAO recommendations in the process. The big challenge ahead will be to make more and deeper spending reductions without impairing its performance."

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